So let's just talk about a lot of the disruption
is all of it right now, in your opinion
, because of the threat of potential sanctions on Russia's
energy sector. What do you make of it?
So there are several things going on with the energy
right now and particularly oil. So the issue that
the market has, and the reason we've seen this
astonishing run up in prices that you mentioned at the
beginning is because it's proving increasingly hard to get enough
oil out of Russia. Russia is the world's the
second largest oil exporter after Saudi Arabia exports about five
million barrels a day of crude oil, about three
million barrels a day of other fuels. And right
now a lot of that isn't flowing and there are
several reasons for that. First, there is a
sanctions issue. While oil isn't sanctioned, many players
are worried that that's going to come and get em
boiled and they're also fearful of getting caught in the
existing financial Sanctions. 2nd, it's very hard to
get ships to Russia right now, many ship owners
who are in charge of the tankers, take Russian
crude out of Russia and deliver it to the rest
of the world are reluctant to call it Russians ports
. So it's hard just to ship the oil.
And thirdly, I think among many traders and some
shipowners, there's actually a reluctance to do business with
Russia and you put all that together and there's quite
a large proportion, not all, but quite a
large proportion of Russian oil that isn't being exported right
now, and that's why prices have leapt and I
want to talk about what we're hearing a little bit
from America's oil executives who are really calling on specifically
here in the US for the biden administration to step
in. We heard from Press Secretary jen Psaki,
she talked about this a little bit. I want
to play that sound and then ask you something out
of it. Our objective and the President's objective has
been to maximize impact on President Putin and Russia while
minimizing impact to us and our allies and partners.
And I know you've heard me say this a few
times before, but we don't have a strategic interest
in reducing the global supply of energy and that would
raise prices at the gas pump for the american people
around the world because it would reduce the supply available
. Alright, well, we heard her commenting right
there. Is there anything though that the biden administration
can do at this point to not let this trickle
down to consumers? Well, they have done some
things they persuaded earlier this week, they led an
effort at the International Energy Agency to release 60 million
barrels a day, 60 million barrels in total of
oil from reserves that are held by the richest industrialized
countries. They are working hard to get a deal
, a nuclear deal with Iran which may pave the
way for much higher. Iranian exports. I think
it's very much at the front of the administration's mind
. And without those two things oil prices would be
higher still in terms of domestic production in the US
, it is probably true that the tone of the
biden administration has been a little bit anti oil.
It hasn't been a huge friend of the industry,
but I think there's a little bit of disingenuousness from
the industry when they say it's all biden's fault that
there's not more oil coming out of texas and other
shale fields. The real issue is that the after
the crash in oil, remember that, that we
saw two years ago the american fracking industry changed tack
. They went from maximizing production to maximizing profits because
that's what their shareholders wanted. So the reason that
they're not producing more is not so much perhaps because
of policy or the policy isn't particularly friendly. It's
mostly because their shareholders are demanding that they keep keep
production under control and maximize the returns to investors.
So then just finally will, I mean, does
this get worse for consumers before it gets any better
? Should people just sort of sit and hold tight
and pay higher prices in the meantime, I'm always
delighted to tell you what the price of oil is
going to be because nobody really knows 100% of the
time. But while we have severe supply disruptions from
Russia, the type that I've described until that gets
solved. There's every reason to think that prices could
well go higher from here